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Lockbox project

Your firm has an average receipt size of $95. A bank has approached you concerning a lockbox service that will decrease your total collection time by two days. You typically receive 9,400 checks per day. The daily interest rate is .016 percent. If the bank charges a fee of $190 per day, should the lockbox project be accepted? What would the net annual saving be if the service were adopted?

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a. The average daily collections are the number of checks received times the average value of a check, so:

Average daily collections = 95(9,400)
Average daily collections = 893,000

The present value of the lockbox service is the average daily receipts times the ...

Solution Summary

The solution explains how to make the accept/reject decision for a lockbox project